There comes a time in life when you must shut down the bank of mom and dad and force your grown children to find their own financial footing, according to money maven Suze Orman.
If you’re a member of Gen X or a baby boomer rolling toward retirement, now’s the time to prioritize you, Orman told Moneywise in an interview back in May, so you can more easily live out your golden years in comfort.
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It’s not up to you to cover your adult kids’ bills — and yet 45% of American parents do, according to a recent survey by Savings.com.
Not only are almost half of U.S. parents forking out money, but the average amount of financial support they’re providing for household necessities like groceries, cellphones and rent or mortgage payments is more than $1,400 per month.
Orman encourages aging parents to get a clear message across to their kids:
“I am no longer your bank account! I'm getting to the point where I need my money to be able to support myself. You are old enough now to go out and figure it out. So don't come to me for money.”
And that isn’t Orman’s only tip that can help you get on solid financial ground before you retire.
Don’t neglect your retirement accounts
In a recent blog post, Orman admitted this is not an easy conversation to have with your kids.
"There are more adult children living at a parent’s home today than thirty or forty years ago," she wrote. "If that’s happening in your home, I sure hope you won’t let your adult kid freeload. That’s not generous to you or to them."
While having that undoubtedly tricky conversation is necessary, it isn’t the only way to ensure a relaxing retirement.
The tough-talking expert stresses the importance of building and using your retirement accounts to their fullest potential.
Orman told Moneywise she believes “the key ingredient to any financial freedom recipe is compounding.”
If you start early and you invest your savings through tax-friendly vehicles like a 401(k), a traditional individual retirement account (IRA), or a Roth IRA you can grow a big pile of cash for retirement.
However, the realities of retirement planning have grown more complicated as Americans navigate inflation, financial crises, a tight labor market and other challenges.
When you’re in the final stretch of your career and retirement is just a few years away, you have to make a few big financial decisions, according to Orman.
“The more expenses you have, the more debt you have, the more income you need when you finally retire,” she explained. “How do you get that income? By having a lot of money in your retirement accounts or investment accounts.”
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Take a hard look at your expenses
Many people have difficulty saving for their retirement because their cost of living is so high and they don't have much left over after paying bills.
That’s when you should tell your kids: “We are no longer your bank account,” Orman stressed. “That is what the line should be if you don’t have enough money.”
She added: “Obviously, if you have more than enough money, you should still tell your kids that so they understand the responsibility and what it takes to make money.”
If your children have flown the nest and you no longer need your large family home, Orman says you should “downsize now.”
If you can downsize in the years before you stop working, this will reduce the mortgage and maintenance payments that eat up so much of the family budget, and allow you to put more of your income toward your retirement.
“If you know you’re going to stay in your home for the rest of your life — if you’re lucky enough to own a home today — then make it your number one priority to have the mortgage paid off by the time you retire,” Orman said.
And that’s not the only cost you should have under control. Lifestyle choices like regularly buying a new car when your lease is up or not checking on your insurance costs can be an unnecessary drain on your finances.
“Stop buying a car every three years, when you could just take care of your car and let it go 10 years, 12 years or longer,” Orman said.
You should also look for other small ways to save money, such as cutting down on how much you spend on streaming and cable services, premium mobile phone plans, and eating at restaurants or ordering meals several times a week.
“Cut your expenses now,” she said.
“Stop spending money you don’t have to impress people you don’t even know or like.”
If you can cut down on your monthly spending, you'll have more money left over to invest and put toward your retirement savings.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
